“Banks started to feel a lot better, businesses started to stabilize,” said CB Richard Ellis’ Ken Meyerson, reflecting on 2010. “There was a risk of it starting to get better and better.”
Mr. Meyerson, who helped broker 2010’s largest lease for tenant Société Générale, was not alone in eyeing the recovery in the office-leasing market and feeling not relief, but concern. Unlike 2009, when landlords and tenants circled each other warily, shaken by the past year and not knowing what the future could hold, 2010 belonged to the bold.
“All the companies in 2009 needed all the cash they could possibly hoard,” Mr. Meyerson said. In 2010, “the storm was settling and … tenants were more opportunistic.”
This past year, the dam broke, the circling stopped. Tenants jumped to lock in cheap rents and generous concessions, in anticipation of a tightening office-leasing market driven by a recovering local economy.
While in 2009 the top leases were dominated by renewals, in 2010 over half of the top 20 leases were new ones. And while none of this year’s leases could top law firm Paul Weiss’ 540,000-square-foot lease in 2009, activity on the beefier end was significantly more robust. Six deals were signed in 2010 of more than 300,000 square feet each, as opposed to only two in 2009.
Overall, more square feet of space was leased in 2010 than in any year since 2006. Activity rose 61.4 percent annually, in fact, according to Cushman & Wakefield’s fourth-quarter Manhattan office report. But of the top 10 leases, seven of the deals were signed in the first half of 2010, when the market was weakest, suggesting that while activity was up, taking rents were not.
In a more encouraging sign for brokers, the deals were more or less evenly spread across industries. In 2009, law firms dominated from the top of the list down to No. 19. In 2010, financial services firms were back, with the Société Générale, Deloitte and Allianz Global leases; media held its own with the CBS and Meredith leases; and there was a smattering of retailers, with Avon and Tiffany among those securing corporate headquarters. In perhaps the most striking addition, three of the top 20 leases in 2010 were by nonprofits, government entities and unions, confirming the trend everyone’s been whispering about.
Still, will the robust level of activity continue as landlords look to raise rents and scale back on concessions? Will conditions keep getting better and better, and therefore worse and worse for tenants?
In a recent briefing to journalists, Joe Harbert, Cushman & Wakefield’s regional COO, said if unemployment drops more sharply, “we could see a little flattening” of office-leasing activity in 2011.
Brokers interviewed by The Commercial Observer said, of course, they anticipate the market will tighten yet more in 2011, making it tougher on tenants and more beneficial for landlords.
A few notes about the list. It was culled using statistics from brokerage Cassidy Turley and database CoStar, and from The Commercial Observer‘s own reporting over the past 12 months. Also, it reflects leases that were closed in calendar year 2010.